|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: HANCOCK JOHN SERIES INC, 497, 1995-11-07 |
Next: FORTIS BENEFITS INSURANCE CO, 424B1, 1995-11-07 |
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 6, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16172
COMPUTONE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2472952
- ---------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1100 Northmeadow Parkway, Suite 150, Roswell, GA 30076
- -------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770)475-2725
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No .
--- ---
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15 (d)
of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No .
--- ---
As of November 6, 1995, there were 6,207,194 shares of common
stock outstanding.
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Interim Consolidated Balance Sheets as of
October 6, 1995 and April 1, 1994 3
Interim Consolidated Statements of Operations for
the three months ended October 6, 1995 and October 4, 1994 4
Interim Consolidated Statements of Operations for
the six months ended October 6, 1995 and October 4, 1994 5
Interim Consolidated Statements of Cash Flows
the six months ended October 6, 1995 and October 4, 1994 6
Notes to Interim Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Computone Corporation
Interim Consolidated Balance Sheets
(in thousands except par value and shares)
<TABLE>
<CAPTION>
October 6, 1995 April 7, 1995
(unaudited) (audited)
--------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 145 $ 297
Receivables, net 2,460 3,253
Inventories, net 2,762 2,174
Prepaid expenses and other 87 110
--------- ---------
Total current assets 5,454 5,834
Property, equipment and improvements, net 723 897
Intangible assets, net 642 891
Other 98 101
--------- ---------
TOTAL ASSETS $ 6,917 $ 7,723
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,216 $ 1,797
Accrued liabilities:
Payroll 121 164
Disputed matter 96 230
Professional fees 88 96
Other 452 425
Line of credit 665 -
Current maturities of long term debt 216 230
--------- ---------
Total current liabilities 2,854 2,942
Notes payable to stockholders 270 270
Long term debt, less current maturities 229 314
--------- ---------
Total liabilities 3,353 3,526
Stockholders' Equity
Convertible redeemable preferred stock, $.01 par
value 10,000,000 shares authorized; 200,000
share issued 2 2
Common stock, $.01 par value; 50,000,000 shares
authorized; 6,207,190 and 6,207,184 shares
outstanding 62 62
Additional paid in capital 41,517 41,517
Accumulated deficit (38,017) (37,384)
--------- ---------
Total stockholders' equity 3,564 4,197
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,917 $ 7,723
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
ITEM 1. Financial Statements (continued)
Computone Corporation
Interim Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 6, 1995 October 7, 1994
--------------- ---------------
<S> <C> <C>
Revenues:
Product sales $2,927 $3,985
Expenses:
Cost of products sold 1,815 2,452
Selling, general and administrative 845 1,090
Product development 234 283
------ ------
2,894 3,825
------ ------
Operating income from continuing operations 33 160
Non-Operating income (expense):
Other income (expense) (1) (1)
Interest expense (24) (6)
------ ------
Income from continuing operations before taxes 8 153
Income tax expense (benefit):
Current - -
Deferred - -
------ ------
- -
------ ------
Income from continuing operations 8 153
Discontinued operations:
Income on disposal - -
------ ------
Income before extraordinary item 8 153
Extraordinary item:
Debt foregiveness - 202
------ ------
Net income $ 8 $ 355
====== ======
Net income per common share and common
share equivalents:
Income from continuing operations 0.00 0.02
Income from discontinued operations - -
Income from extraordinary item - 0.04
------ ------
Net income per common share $ 0.00 $ 0.06
====== ======
Weighted average common shares and
common share equivalents outstanding 6,383 6,412
====== ======
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
ITEM 1. Financial Statements (continued)
Computone Corporation
Interim Condensed Consolidated Statements of Income
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
October 6, 1995 October 7, 1994
--------------- ---------------
<S> <C> <C>
Revenues:
Product sales $5,328 $7,390
Expenses:
Cost of products sold 3,045 4,544
Selling, general and administrative 2,097 2,071
Product development 789 575
------ ------
5,931 7,190
------ ------
Operating income from continuing operations (603) 200
Non-Operating income (expense):
Other income (expense) 10 1
Interest expense (39) (7)
------ ------
Income from continuing operations before taxes (632) 194
Income tax expense (benefit):
Current - -
Deferred - -
------ ------
- -
------ ------
Income from continuing operations (632) 194
Discontinued operations:
Income on disposal - 86
------ ------
Income from discontinued operations - 86
------ ------
Income before extraordinary item (632) 280
Extraordinary item:
Debt foregiveness - 202
------ ------
Net income $ (632) $ 482
====== ======
Net income per common share and common
share equivalents:
Income from continuing operations -0.10 0.03
Income from discontinued operations - 0.01
Income from extraordinary item - 0.04
------ ------
Net income per common share $-0.10 $ 0.08
====== ======
Weighted average common shares and
common share equivalents outstanding 6,383 6,205
====== ======
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
Computone Corporation
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the six months ended
October 6, 1995 October 7, 1994
(unaudited) (unaudited)
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (632) $ 396
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in)
continuing operations:
Depreciation and amortization 616 438
Provision for possible losses (354) (28)
Forgiveness of debt - (202)
Changes in current assets and current liabilities:
Accounts receivables 1,147 (389)
Inventories (589) 859
Prepaid expenses and other 23 (7)
Accounts payable and accrued liabilities (753) (682)
------ ------
Net cash provided by (used in) continuing operations (542) 385
------ ------
Income (loss) from discontinued operations - 86
Adjustments to reconcile income from discontinued
operations to net cash used in discontinued
operations:
(Income) loss on disposal - (86)
Change in net assets of discontinued operations - (104)
------ ------
Net cash used in discontinued operations - (104)
------ ------
Net cash provided by (used in) operating activities (542) 281
------ ------
Cash flows from investing activities:
(Increase) decrease in other assets 3 (54)
Capitalization of software costs (158) (123)
Capital expenditures (35) (40)
------ ------
Net cash used in investing activities (190) (217)
------ ------
Cash flows from financing activities:
Borrowings under long term debt agreements 300
Net borrowings (repayments) under line of credit 665
Repayment of debt - net (85) (270)
Exercise of common stock options and warrants - 12
------ ------
Net cash provided by financing activities 580 42
------ ------
Net decrease in cash and cash equivalents (152) 106
Cash and cash equivalents, beginning of period 297 215
------ ------
Cash and cash equivalents, end of period $ 145 $ 321
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 39 $ 7
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
COMPUTONE CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
---------------------
The financial statements included in this Form 10-Q have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed, or omitted, pursuant to such rules and
regulations. These financial statements should be read in conjunction
with the financial statements and related notes included in the
Company's Fiscal 1995 Form 10-K.
The financial statements presented herein, as of October 6, 1995
and for the three and six months then ended, reflect in the opinion of
management, all adjustments necessary for a fair presentation of
financial position and the results of operations for the periods
presented. The results of operations for any interim period are not
necessarily indicative of the results for the full year.
2. INVENTORIES
-----------
Inventories, net of a reserve for obsolete, excess and non-salable
items, consisted of the following at October 6, 1995 and April 7, 1995
(in thousands):
<TABLE>
<CAPTION>
October 6, 1995 April 7, 1995
--------------- -------------
<S> <C> <C>
Finished goods $ 751 $ 544
Work in progress 627 584
Raw materials 1,384 1,046
------ ------
$2,762 $2,174
------ ------
</TABLE>
3. INCOME PER SHARE
----------------
Income per common share is computed by dividing net income
applicable to common stock by the weighted average number of shares of
common stock and common share equivalents outstanding during each
period.
7
<PAGE>
COMPUTONE CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. INCOME TAXES
------------
On April 3, 1993, the Company adopted the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Such
adoption had no cumulative effect on the Company's consolidated
financial statements. Prior years' financial statements have not been
restated.
The Company has available net operating and capital loss
carryforwards, including preacquisition operating loss carryforwards
which relate to a predecessor company, which expire during the period
2003-2008. The Company's possible use of the loss carryforwards will be
limited as a result of several different changes in ownership which have
occurred since the carryforwards started to accumulate. The use of the
net operating loss carryforwards are limited due to statutory provisions
which apply after certain changes in control occur.
For financial reporting purposes, a valuation allowance has been
established to reflect a net deferred tax balance of $0 as of the date
of adoption of FAS 109 as well as at October 6, 1995.
The Company estimates that no current provision for income taxes is
required for the three months ended October 6, 1995.
5. DEBT
----
On August 12, 1994, the Company secured financing from a bank in
the form of a $300,000 note payable and a $500,000 revolving credit
agreement ("Agreement"). On April 7, 1995, the Company refinanced the
note in the amount of $402,823 and reduced the monthly payments from
$16,666.67 to $13,427.44. The note bears interest at a rate of floating
prime plus 2%. On July 31, 1995, the Agreement was extended to $750,000
and it bears interest at a rate of floating prime plus 1% on any
proceeds and .50% on any unused portion of the line. The prime rate was
8.75% at October 6, 1995. The Agreement also calls for collateral
consisting of accounts receivable, inventory and equipment and is
guaranteed by an officer of the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 6, 1995.
INTRODUCTION
------------
The comparative information contained herein includes results of
operations for the Company's continuing businesses. Certain previous
components of the Company are presented as discontinued operations in
the accompanying Consolidated Financial Statements.
LIQUIDITY
---------
Cash used in continuing operations amounted to $542,000 for the six
months ended October 6, 1995 compared to cash provided by continuing
operations of $385,000 for the comparable six months ended October 7,
1994. The reduction in cash provided by continuing operations as
compared to the prior year fiscal period primarily reflects the decrease
in product sales.
Cash used in financing activities amounted to $190,000 for the six
months ended October 6, 1995 compared with $217,000 used in financing
activities for the comparable six months of the prior fiscal year. This
increase from the same period of the prior fiscal year can be
attributable to the Company capitalizing a greater amount of software
development costs as a result of a higher development headcount and
activities surrounding the development of more new products.
Cash provided by financing activities during the six months ended
October 6, 1995 increased by $580,000 from the same six months of the
prior fiscal year as a result of the Company borrowing against its
revolving credit agreement.
Working capital amounted to $2,600,000 at October 6, 1995, a
decrease of $292,000, since April 7, 1995. The ratio of current assets
to current liabilities at October 6, 1995 was 1.91 to 1.00 compared to
1.98 to 1.00 at April 1, 1994. The decrease in working capital is
primarily attributable to the decrease in product sales.
RESULTS OF OPERATIONS
---------------------
Product sales revenue from continuing operations for the quarter
ended October 6, 1995 totaled approximately $2,927,000 compared to
$3,985,000 for the comparable quarter of the prior fiscal year, a
decrease of 27%. For the six months ended October 6, 1995, product
sales revenues decreased 28% from $7,390,000 to $5,328,000 versus the
same period of the prior fiscal year. These decreases in product sales
revenue can be attributed to the Company's reduction in sales to a major
international OEM and a domestic distributor.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 6, 1995 (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
Cost of products sold for the quarter amounted to $1,815,000 or 62%
of product sales revenues versus $2,452,000 or 62% for the comparable
quarter of the prior year. For the six months ended October 6, 1995,
cost of sales amounted to $3,045,000 or 57% of product sales revenues
versus $4,544,000 or 61% during the same six month period of the prior
fiscal year. The decrease in cost of products sold as a percentage of
product sales revenues for the six months ended October 6, 1995 can be
attributed to the Company's decision, in the third quarter of last
fiscal year, to begin outsourcing the production of a majority of its
products.
Selling, general and administrative expenses amounted to $845,000
or 29% of product sales revenue for the three months ended October 6,
1995 versus $1,090,000 or 27% of product sales revenue for the
comparable three months of the prior fiscal year. For the six months
ended October 6, 1995, selling, general and administrative expenses were
$2,097,000 or 39% of product sales revenues versus $2,071,000 or 28% of
product sales revenues for the same six month period of the prior fiscal
year. The decrease in expenses during the quarter ended October 6, 1995
versus the same period of the prior fiscal year can be attributed to the
Company's ability to reduce its headcount while providing a greater
level of service to its customers, a reduction in professional fees
resulting from the settlement of various lawsuits and the Company
becoming re-listed on the NASDAQ stock market and the Company's
successful efforts in reducing its day-to-day operating expenses. Also,
the Company is in the process of reviewing its alternatives with respect
to relocating to a new facility in the same general area which will
result in a significant reduction in the Company's overall monthly
occupancy costs.
Product development expenses amounted to $234,000 or 8% of product
sales revenue for the three months ended October 6, 1995 versus $283,000
or 7% of product sales revenue for the comparable three month period of
the prior fiscal year. For the six month period ended October 6, 1995,
product development expenses were $789,000, or 15% or product sales
revenues as compared to $575,000 or 8% of product sales revenues during
the six month peirod ended October 7, 1994. The decrease during the
three months ended October 6, 1995 can be attributed a reduction in
amortization expense as a result of accelerating the expense for certain
products during the first quarter of this fiscal year. The increase in
product development expenses during the six months ended October 6, 1995
versus the same period of the prior fiscal year can be attributed to a
one-time charge to accelerate the amortization of product development
expenses related to costs capitalized prior to April 1, 1994. This
one-time charge of $277,000 in the first quarter of this fiscal year
will result in an annual savings of over $100,000 during this fiscal
year and $144,000 during the next fiscal year.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 6, 1995 (CONTINUED).
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
The Company reported income from continuing operations for the
quarter ended October 6, 1995 of $8,000 compared to income from
continuing operations of $153,000 for the comparable quarter of the
prior fiscal year. This quarter marks the first in three quarters that
the Company has shown income from operations. This turnaround can be
attributed the Company's continuing efforts to reduce its cost of
products sold through production outsourcing and the reduction of
day-to-day operating expenses. For the six months ended October 6,
1995, the Company had an operating loss of $632,000 versus operating
income of $194,000 during the same period of the prior fiscal year.
This decrease in operating income can be attributed to the decreased
levels of product sales along with the one-time charges in the first
quarter for $277,000 of accelerated product development amortization, a
$75,000 accrual for moving expense and a $200,000 accrual for potential
product returns. Excluding these one-time charges, the loss from
continuing operations would have been approximately $80,000 for the six
months ended October 6, 1995.
Income from discontinued operations totaled $86,000 for the six
months ended October 7, 1994 whereas the Company recorded no income from
discontinued operations for the three months ended October 6, 1995. The
$86,000 related to the fact that the loss on disposal of Princeton and
Denison was less than originally provided for and, therefore, the
estimated disposal costs were reduced. Also, the Company recorded
extraordinary income of $202,00 for the six months ended October 7, 1994
related to the settlement of outstanding balances
11
<PAGE>
PART II - OTHER INFORMAITON
ITEM 1. LEGAL PROCEEDINGS
None, other than those matters described in Item 3 to the
Company's Annual Report on Form 10-K for the year ended April
7, 1995.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COMPUTONE CORPORATION
Date: November 6, 1995 By: /s/ Thomas J. Anderson
-----------------------------------
Thomas J. Anderson
President & Chief Operating Officer
(duly authorized officer and
Principal Executive Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-05-1996
<PERIOD-START> JUL-08-1995
<PERIOD-END> OCT-07-1995
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 2,842
<ALLOWANCES> 382
<INVENTORY> 2,762
<CURRENT-ASSETS> 5,454
<PP&E> 3,621
<DEPRECIATION> 2,898
<TOTAL-ASSETS> 6,917
<CURRENT-LIABILITIES> 2,854
<BONDS> 0
<COMMON> 62
0
2
<OTHER-SE> 3,500
<TOTAL-LIABILITY-AND-EQUITY> 6,917
<SALES> 2,927
<TOTAL-REVENUES> 2,927
<CGS> 1,815
<TOTAL-COSTS> 2,894
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 8
<INCOME-TAX> 0
<INCOME-CONTINUING> 8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
|
|